(Bloomberg Opinion) -- It’s the end of an era at General Electric Co.
The industrial giant that evolved out of the invention of the modern lightbulb agreed on Wednesday to finally sell the remaining vestiges of its lighting business to smart-home company Savant Systems Inc. Terms weren’t disclosed, but the Wall Street Journal reported a price tag of $250 million, which seems like a decent valuation for a business that had become such a small part of GE’s overall enterprise.
The symbolism is rich. After all, GE traces its roots back to Thomas Edison, the inventor of the modern lightbulb, and just celebrated the 128th anniversary of the founding merger of Edison General Electric Co. with Thomson-Houston Electric Co. The fingerprints of Edison’s legacy will linger: The lightbulb gave way to the X-ray machine, which GE still sells through its health-care unit, and early versions of the light bulb used carbon filaments, a permutation of which are now used in jet-engine parts made by the company’s aviation unit. And yet, selling the light-bulb business marks another historic break with GE’s past, much like the divestiture of its appliances division to China’s Haier Group in 2016 and its hard crash out of the Dow Jones Industrial Average in 2018. Like Haier, Savant has struck a long-term licensing agreement to continue branding the bulbs with the GE name. GE will live on as a household name, but as a shell of its former self.
The lighting sale has been a long time coming. And while the nostalgic side of me may feel a little sad to see GE officially drop out of the consumer landscape, it’s a step forward for CEO Larry Culp’s turnaround efforts. GE considered divesting the division that housed the lighting operations amid the financial crisis of 2008; this more recent sales effort goes back to at least 2016. Jeff Immelt was still CEO back then. His successor, John Flannery, also included lighting in the list of assets he would try to sell as he dug GE out of a cash-flow hole caused by challenges in its gas turbine business. But it was Culp who officially inked a deal to sell the commercial part of the lighting operations to private equity firm American Industrial Partners in late 2018, and he’s the one who’s finally found a buyer for the residential lightbulb business. This asset sale isn’t going make or break the company, but every bit helps as the coronavirus pandemic hobbles GE’s crown jewel aviation unit and deepens its cash crunch. It’s downright impressive that Culp was able to get a deal done at all in the middle of a pandemic. That may be a big reason why GE shares were up more than 9% at one point Wednesday morning after the news. There’s no way to sugarcoat the challenges facing the aviation unit right now. While GE’s fleet of engines is younger than many peers and focuses mostly on the narrow-body jets that are likely to come back into service first as air travel starts to slowly pick up again, a wave of retirements for more maintenance-heavy, older models will still hurt and risks creating a glut of spare parts. It remains unclear why GE’s aviation unit fared so much worse in the first quarter than rival engine maker Pratt & Whitney and other aerospace suppliers. But the lighting sale is a sign that Culp isn’t giving up on turning GE around and adapting the company to its current reality.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Brooke Sutherland is a Bloomberg Opinion columnist covering deals and industrial companies. She previously wrote an M&A column for Bloomberg News.
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